The Privacy and Implications of the Actual Company

Abstract

The general rule of nullity requires that the partners be returned to the state they were in before the contract, which means that nullity has a retroactive effect, so the contract collapses in its entirety. This rule can be applied if the reason for nullity is revealed from the beginning, but if the contract has been executed and the legal entity has emerged from it, then if the general rule is applied to it, this will lead to the squandering of the transactions carried out by the legal entity and the elimination of their effects, which will lead to unusual results, whether from a practical or economic perspective. If the retroactive effect of nullity is applied, this will lead to ignoring situations and facts that actually existed during the period prior to the ruling of nullity, the most important of which is the existence of a legal entity that was involved in transactions with others, and thus became a creditor or debtor and obtained profits and suffered losses. Therefore, the judiciary has settled that when a ruling is made to nullify the company, its effects are limited to the future only and do not extend to the past, as the company is considered to exist and its activity is taken into account for the period between its formation and the ruling of nullity. However, recognition of the company during this period is nothing more than recognition of the actual or de facto existence of the company and is not based on a legal basis. Therefore, this company is called the actual company.